Managing the Hospitality Supply Chain Comeback

Industry Focus
managing the hospitality supply chain comeback

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The hospitality supply chain was a complex beast with numerous operations and suppliers’ event even before the pandemic disrupted the industry. Couple that with the heavy dependence on the global supply chain, fluctuating costs, the workforce shortage and unpredictable availability the industry outlook has become more than a little murky.

Hospitality operations are incredibly cost-sensitive and price-conscious. This is largely because of the inefficiencies from hotels needing to keep many disparate operations afloat in order for their guests to have a memorable experience.

For instance, to motivate room reservations and to command a higher nightly rate, an onsite restaurant becomes an intrinsically mandatory amenity for many properties, especially those in remote locations. This FOCUSfood-and-beverage (F&B) operation then requires equipment, supplies, software and staff. Now with the current staffing shortages forcing many hotels to limit hours of operation or pay overtime, it’s hard to break even. In this way, restaurants have become a ‘loss leader.’

Beyond F&B, next consider other common operations and the gears necessary to make them turn—group sales, catering, front desk, parking or valet, security, IT, reservations, housekeeping, engineering, marketing and accounting, as well as other resort-style features like spa, golf, activities and gift shops. These various operations mean lots of sourcing but also lots of staff, technology fees and manager salaries.

The margins after all these costs are tabulated as net operating income (NOI)—and before taxes, capital expenditure budgets and debt service coverage—can be threadbare, which primes hoteliers to look for ways to improve efficiency and trim costs while maintaining the customer experience and brand promise.

Pandemic impact

“Supply chain issues are impacting virtually every industry, including hospitality, and Marriott is working through a dynamic and quickly evolving supply chain recovery,” said Marriott International’s chief global officer, Erika Alexander, who was also one of the keynotes at MODEX 2022.

“Through these challenges, we have stayed committed to our long-term goals,” added Alexander. “As the world’s largest hospitality company, we use our purchasing power to create value for owners and franchisees, accelerate opportunities for diverse suppliers, and drive sustainable sourcing practices to reach net-zero greenhouse gas emission no later than 2050.”